Quote:
Originally Posted by jay santos
overconfident = a form of incompetence. no?
I'm being overly aggressive in this thread but it's to balance what I perceive the vast majority of being way too far on the trusting side of "investment advisors".
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Yes, but itss universal incompetence ...
You have most of the ex ante implications right. It is, of course, easy to find a strategy that from an ex ante perspective that will on average outperferform the market by over 2-3%: buy a double the market ETF. Of course, its pretty risky. Controlling for risk it is very difficult to find persistence in performance particularly at that level. This is not to suggest that fund managers don't have skill but on average they charge you for that skill and after costs on average they do worse than the market. Yes, there are always some managers that outperform the market in a given period, but there is almost no persistence in the performance. Some characteristics seems to matter but only ones that are difficult to observe. For example SAT score actually matter. Managers with higher SAT scores actually outperform (relative to some risk adjustments).